Posted by Mark Mulligan on February 10, 2010
Real Networks yesterday announced that they intend to spin-off music subscription service Rhapsody as a stand alone business. Rhapsody has long been held up as the best of breed music service, but in the age of Spotify and Comes With Music it and other premium rentals have increasingly struggled to maintain relevancy. Spotify and Comes With Music each may have fundamental business issues and are very different offerings, but they both provide unlimited music free at point of consumption. Once you have that proposition in the marketplace selling 9.99 rented streams looses its shine, however good the discovery and usability may be.
This time two years ago Rhapsody, Napster and Yahoo had about 1.8 million paying subscribers between them. Since then Yahoo got out of the game (passing its subs onto Rhapsody), Napster got sold and the total count is now around 1.3 million. So just as the music industry is meant to be booming online, its premium tier sheds over a quarter of its value across its heavyweight proponents.
The simple fact is that charging 9.99 or more a month for music that often only sits on your PC is not a mass market value proposition. It’s great for aficionados but mass market consumers aren’t used to buying music that way.
So is this the end for subscriptions? No, not at all, in fact they’re doing better than ever, it’s just the old guard that is struggling to keep pace. A new generation of subscription services are being built that place portability at their core and that often hide some or all of the end-cost to consumers.
Let’s take a quick look at the numbers, here are total paid subscribers by territory (all numbers are approximate):
- Europe: 1.25 million (key players: Spotify, Vodafone, Napster)
- US: 2 million (key players: Rhapsody, Napster)
- ROW: 5 million (key players: Melon)
That gives a global total of about 8.25 million, which is promising though still short of where they need to be. If subscription services are to help digital music break free of the iPod orbit and go mass market then two things need to happen:
- Premium subscriptions need to be unlimited MP3
- Mass market subscriptions need to have channel partners such as telcos and device companies hide some or all of the cost to consumers i.e. subsidized subscriptions (For the record I think the ‘cost to consumer’ price point for unlimited music should be 3 euros/dollars/pounds a month.)
The first generation of subscriptions may have been niche also rans, but the next wave – given the right business models – could be much more important.